Feds say senior Google execs knew about illicit pharma ads

New details have emerged about last year's $500 million settlement between …

The Wall Street Journal on Wednesday revealed new details of a federal prescription drug sting that ultimately cost Google half a billion dollars. In early 2009, a man serving jail time for wire fraud helped the authorities set up websites purporting to be Mexican pharmacies offering prescription drugs to American consumers in violation of US laws. According to the US Attorney who led the sting, senior Google executives, including Larry Page, "knew about the illicit conduct" but did not put a stop to it.

Federal officials approached Google with evidence of its employees' wrongdoing in mid-2009. After two years of negotiation, Google agreed to pay $500 million to settle the allegations and ward off criminal charges against the company. The settlement was widely reported last year, but few details about the charges were made public at that time. New details emerged this week after the man the feds enlisted to help set up the sting, convicted con artist David Whitaker, revealed details about it to the Wall Street Journal. Whitaker received a nearly 6-year jail sentence for his part in an unrelated fraud case late last year—a sentence that was presumably reduced in recognition of his assistance in the Google case.

When the sting began in 2009, Google had in place policies designed to block illicit pharmaceutical advertising. Whitaker's orders were initially rejected under those policies. But Whitaker says Google sales reps helped him tweak his sites to skirt the rules.

"It was very obvious to Google that my website was not a licensed pharmacy," Whitaker told the Journal. "Understanding this, Google provided me with a very generous credit line and allowed me to set my target advertising directly to American consumers."

Whitaker and federal agents set up a series of websites with names like SportsDrugs.net and NotGrowingOldEasy.com, which claimed to offer drugs such as HGH, steroids, RU-486, oxycodone, and hydrocodone to American consumers without a prescription. Whitaker told the Journal that he "signaled his illegal intent" by, for example, telling Google sales executives that his shipments had been seized by US customs officials.

According to federal prosecutor Peter Neronha, internal documents obtained by investigators demonstrate that senior Google executives, including now-CEO Larry Page, "knew what was going on." Before she left for Facebook in 2008, Sheryl Sandberg reportedly raised concerns about the sale of illicit pharmaceutical ads. The Journal doesn't provide details about the extent of Page's knowledge.

We contacted Google, but the company declined to comment on this week's revelations. "As we've said, we take responsibility for our actions," a Google spokesman told Ars. "With hindsight, we shouldn't have allowed these ads on Google in the first place."

Pattern of profiting from illegal behavior?

This isn't the first time Google has faced accusations of turning a blind eye to illegal activities by advertising customers. Last year, the Copyright Alliance, an advocacy group funded by major content companies, accused Google of turning a blind eye to the use of Google ads to monetize copyright infringement, and speculated that the firm's opposition to the PROTECT IP Act was motivated by a desire to profit from piracy.

Specifically, the post pointed to a 2006 affidavit in which the operator of a "rogue" website said that he had worked directly with a series of Google ad representatives who, he claimed, were aware of the infringing activity on the website but nevertheless helped him optimize his advertisements to increase clickthrough rates.

For smaller customers, Google sells ads using an automated, self-service Web interface. This interface makes it easy for the search giant to disclaim knowledge and responsibility for the content that appears alongside its ads. But as customers' ad volumes grow, Google's human sales force begins working directly with customers to help them optimize their ads and encourage them to buy more. At this point, it becomes much harder for Google to dissociate itself from unsavory content.

Google does cut off advertisers who are found to be engaged in illegal activities. For example, the Megaupload indictment revealed that Google stopped doing business with Megaupload in 2007, citing discomfort with the volume of infringing material on the file-sharing site.

Still, it's worth asking why Google was given the opportunity to settle such serious charges against it by writing a check, while Megaupload not only faced criminal charges, but had its servers seized and its executives arrested before they even had their day in court. (Google gave back $500 million, while Megaupload was said to have earned only $175 million total.)

To be sure, there are important differences between the two firms, but the core accusation—that Google employees knew about serious illegal activities by their customers—is also central to the government's case against Megaupload. The government is probably right that Megaupload was much more deeply involved in infringing activities than was Google as a whole, but Megaupload should have had its day in court before its servers got shut down.

Come on Google is greedy, they sell ads. What else do you expect? I do not use much of anything Google. I can't respect such a company that simply creates software and products to better track people and sell more ads. They are not evil, they are just selling their soles for ads.

Obviously Google is obliged to operate within the limits of all laws which apply to them, but this shouldn't be illegal. People should not be prevented from hurting themselves if they have full knowledge of the consequences in advance and are competent to make decisions for themselves.

If Google broke the law, then they must suffer the consequences dictated by the law, but I don't think Google has done anything wrong besides breaking the applicable laws and I hope some day these laws are overturned.

Come on Google is greedy, they sell ads. What else do you expect? I do not use much of anything Google. I can't respect such a company that simply creates software and products to better track people and sell more ads. They are not evil, they are just selling their soles for ads.

Google had in place policies designed to block illicit pharmaceutical advertising.

After an earlier case where Google ads were found to abet illegal sales, Google agreed with the DoJ that they would install an independent monitor of its ads and practices. Allegedly, many of the actions by Google staff were to abet the illegal advertisers in end-running the monitor.

This case seems to be about Google staff actively aiding and abetting criminal activity. For all the tech angle that we Ars readers like, its core is well-grounded in US law.

There were a lot of posts at the WSJ about “entrapment,” but none of them mentioned the specific laws that were broken, and how they couldn't have been had Google merely done what it said it would. Hard to see first amendment rights at issue, or indeed ANY basis for challenging the outcome that was more grounded than radical fringe Libertarian pontifications.

Warning: the law that Google was alleged to have violated appears to be the FD&C Act, and is rather lengthy. But Googling for "Google FD&C violation" produced several bloggers, etc., who thought the case was pretty open-and-shut. Sure seems that if Google really felt like contesting a half billion dollar disgorgement of its revenues, even a small chance of success would be worth its trouble financially.

Ah ... part news story, part editorial. Welcome to Internet News, where the separation between news and editorializing is well, not much. Wasn't this behavior everyone's favorite complaint about newspapers?

No, I don't necessarily disagree with the editorial message that appears at the end. But could you wait a day and wrap it up, along with another example or two, in a separate piece?

You know ars, there's value in letting the news --- boring and dry as it may often be --- stand on its own and letting the reader decide its significance. Doing so helps breed intelligent readers, not hand-held ones who can't think for themselves.

My apologies to everyone who has low tolerance for reading unexpected rants. (You'll be OK.)

Obviously Google is obliged to operate within the limits of all laws which apply to them, but this shouldn't be illegal.

Didja read the article? The criminal who helped the Feds was engaging in common fraud, and preying on an especially vulnerable population at that (people who need life-saving drugs but have money trouble).Indeed the Congress originally created the FDA to block this type of fraud, which also includes selling milk powder as drugs, selling bad batches that can OD or under-dose you, even selling a different and MORE dangerous hormone cocktail than the steroids you THINK you are buying. Dunno why anybody would want to encourage or support this immoral, reprehensible behavior unless it were really necessary to protect something else valuable.

Even for a perfectly legit Canadian pharmacy, these sales may make it impossible to contact customers of batches subject to product recalls, etc. Many others will say it is to protect drug industry profits, which is undoubtedly true, but it is clearly not totally one-sided.

Especially with a foreign firm, you have effectively no recourse even if you find out that you didn't get what you paid for.

Google had in place policies designed to block illicit pharmaceutical advertising.

After an earlier case where Google ads were found to abet illegal sales, Google agreed with the DoJ that they would install an independent monitor of its ads and practices. Allegedly, many of the actions by Google staff were to abet the illegal advertisers in end-running the monitor.

This case seems to be about Google staff actively aiding and abetting criminal activity. For all the tech angle that we Ars readers like, its core is well-grounded in US law.

There were a lot of posts at the WSJ about “entrapment,” but none of them mentioned the specific laws that were broken, and how they couldn't have been had Google merely done what it said it would. Hard to see first amendment rights at issue, or indeed ANY basis for challenging the outcome that was more grounded than radical fringe Libertarian pontifications.

Warning: the law that Google was alleged to have violated appears to be the FD&C Act, and is rather lengthy. But Googling for "Google FD&C violation" produced several bloggers, etc., who thought the case was pretty open-and-shut. Sure seems that if Google really felt like contesting a half billion dollar disgorgement of its revenues, even a small chance of success would be worth its trouble financially.

Surely it's only entrapment if the "Pharma" company asked how to circumvent the rule(s)?One would hope that they were sensible enough not to do that and instead wait for a Google rep to make an offer.

Obviously Google is obliged to operate within the limits of all laws which apply to them, but this shouldn't be illegal. People should not be prevented from hurting themselves if they have full knowledge of the consequences in advance and are competent to make decisions for themselves.

If Google broke the law, then they must suffer the consequences dictated by the law, but I don't think Google has done anything wrong besides breaking the applicable laws and I hope some day these laws are overturned.

You seriously don't have any problem with advertising unregulated pharmaceutical products. Do you have any knowledge of history at all and how the regulatory agencies that regulate these things came about?

Also the idea that people had 'full knowledge' is utter rubbish. If Google is advertising something to me then I expect it to be a legitimate business and ideally have undergone some vetting (even if minimal). This is a trust issue and I now have less faith in Google as a brand and also in the integrity of their adverts which means I am less likely to click on them or trust them. If enough people feel the same then this could become a business problem for them.

This is despite the fact that I live in a civilised country which actually has national health care provision unlike the mess you guys have in the U.S. Yes I know Obama's tried to fix it a bit to his credit, but the poor guys plans were strangled by the people who prefer to let poor people die and suffer.

Timing is curious. Why all the negative Google press lately? Is it a "old media" response to their involvement in the anti-SOPA/PIPA protests?

Smear, subvert, split. Sounds like a familiar political attack strategy to me...

Might be, but then, it might not, eh? Or, might you admit, your response could look like an apologist's attempt to spread FUD? Why go there without any evidence?

The original WSJ story about Google's actions was last summer. I don't recall seeing anything at Ars then, but I sure noted that Google had disgorged a half billion of illegal revenues, something that firms don't do unless that's the best they can get under the law. The prosecutor was allowed then to make noises about how top Google staff were involved, but it seems part of the Google deal was to seal the emails and other incriminating documents.

Some of this is necessarily guesswork, of course. Alternate explanations that don't involve non-Earth aliens, welcome.

Today's news was that the Feds allowed reporters access to the informant; likely only after the plea bargaining had all been wrapped up. And the flashy headline apparently caught Ars's eyes.

The other WSJ article about Google today was how Google will tie all your information together. I haven't seen Ars' or anybody else's take on that story, so don't know if it could BE part of a smear campaign. If you don't think it's evil, then I don't suppose you'd think it part of a smear campaign.

[edit: inadvertently edited out info that the WSJ editorial page came out strongly against SOPA; per tycheung's concerns this is hardly surprising. And also the fact that I didn't see Google particularly tied to the anti-SOPA battle; Wikipedia and Facebook were however knocked.]

The difference between Google and MegaUpload is that Google had a half billion to pay off the feds while Mega did not.That's it, it's just that simple. Just like how the poor man will go to jail while a rich man can often just pay a big fine. Justice depends on the contents of your bank account at all levels.

Timing is curious. Why all the negative Google press lately? Is it a "old media" response to their involvement in the anti-SOPA/PIPA protests?

Smear, subvert, split. Sounds like a familiar political attack strategy to me...

Maybe they did and maybe they did not. There were a lot of companies that were anti-SOPA. That doesn't change the fact the Google has been slowly becoming like MS in the 80s and 90s when they had no scruples.

Obviously Google is obliged to operate within the limits of all laws which apply to them, but this shouldn't be illegal.

Didja read the article? The criminal who helped the Feds was engaging in common fraud, and preying on an especially vulnerable population at that (people who need life-saving drugs but have money trouble)

Did YOU read the article? The drugs mentioned are: HGH, steroids, RU-486, oxycodone, and hydrocodone. Best as I can tell, the most likely use for these are sports performance enhancing, abortions, and recreational usage.

The difference between Google and MegaUpload is that Google had a half billion to pay off the feds while Mega did not.That's it, it's just that simple. Just like how the poor man will go to jail while a rich man can often just pay a big fine. Justice depends on the contents of your bank account at all levels.

The half billion was disgorgement of all their revenues tied to the illegal ads. MegaUpload was about lost revenues more than illegally acquired revenues.

They aren't the only ones. Why is the law applied so selectively?! Why is public opinion and media coverage a factor in applying the laws?

"Learn this weird trick to xxx" where xxx is weight loss or teeth whitening or quitting smoking.

"Single mom's trick to xxx" where xxx is the same as above.

"Cheaper prescription drugs" (Oh yes this too.)

I've been noticing those ads all over the Internet, not just hosted by Google, for at least 3-4 years now. Maybe longer. It is obviously a scam, and likely from the same scammers. The ads are still running on cnn.com for example, and many other legit sites. It is sickening.

The difference between Google and MegaUpload is that Google had a half billion to pay off the feds while Mega did not.That's it, it's just that simple. Just like how the poor man will go to jail while a rich man can often just pay a big fine. Justice depends on the contents of your bank account at all levels.

The two cases are totally different. The vast majority of Google's business comes from legitimate advertising but a small percentage was illegal. The vast majority of MegaUpload's business was illegitimate piracy, but a small percentage was legal. Those are very different situations.

Frankly, I'm pretty disgusted to hear Ars defending MegaUpload. It makes it hard to believe that your objections to SOPA end with freedom of speech and dns security concerns.

So was Google helping people sell legitimate drugs illegally across the border? Or was Google helping sell fake drugs? When I heard about this the first time, the country was Canada not Mexico. It was well known in upstate NY that you could get cheaper meds in Canada. Cuz screw the old and the poor if they can't pay the high drug costs of the US. They should obviously just die.

Ah ... part news story, part editorial. Welcome to Internet News, where the separation between news and editorializing is well, not much. Wasn't this behavior everyone's favorite complaint about newspapers?

No, I don't necessarily disagree with the editorial message that appears at the end. But could you wait a day and wrap it up, along with another example or two, in a separate piece?

You know ars, there's value in letting the news --- boring and dry as it may often be --- stand on its own and letting the reader decide its significance. Doing so helps breed intelligent readers, not hand-held ones who can't think for themselves.

My apologies to everyone who has low tolerance for reading unexpected rants. (You'll be OK.)

The New York Times just had a blog asking readers, "Should The Times Be a Truth Vigilante?" http://publiceditor.blogs.nytimes.com/2 ... vigilante/The topic was generally about political campaign lies/distortions; the reader response was overwhelmingly, "What do you think we're paying for?", "If I wanted stenography, I'd subscribe to the AP Wire", etc.

From another angle, the rule we used to use 50 years ago was that if it had a byline, it included writer's comment. I have no problem with that; I like context with the news.

Google ads on illegal pharmacy ads, check. Google ads on piracy/counterfeit websites, check. Is it any wonder Google was a driving force behind the anti-SOPA hysteria? For them, it's about the money. What's surprising is that most people don't seem to care.

There is no such thing as legitimate advertising. It should all be forbidden by law and enforced with death penalty.

So tell me then, why is advertising your product one of the basic aspects of selling goods or services? If I provide something and want to make a living by selling my widget or service, I need to tell people about it. The more people that find out about my product, the more happy customers I can have in the future and the more money I can make. It's the foundation of commerce.

Still, there is a real problem with advertising. You touched on it in your post. People really hate irrelevant advertising. Sellers hate wasting money on advertising to someone who would not buy their products. Potential customers hate being bombarded with advertising for things they cannot or would not buy. This was bad with mail advertising but it's gotten even worse in the internet age. With the cost of email and web advertising being relatively low, you have lots of companies that would gladly just spam the shit out of everyone in the hopes that a certain percentage of those ads are seen by people who become customers.

Still, even online advertising costs money and there are plenty of businesses that have no desire to waste money on advertising that does nothing more than annoy people for whom the ads are irrelevant. Enter Google and other companies we love to hate for selling targeted advertising.

It would seem that when a Google establishes you as someone from the greater Chicagoland region who searches for boating supplies, they are able to pull from their available ads and serve you up sidebar links to local boating events or stores. If they showed you ads for a yoga pants store in L.A. it would be a wasted and irrelevant ad. The person selling the yoga pants wasted money on their posting and the boater from Chi-town has completely irrelevant links in their sidebar.

While this is getting off topic, I do think that companies that develop effective algorithms for ad-targeting and delivery play an important role in modern commerce. Sure, advertisers would love it if getting the word out were free and people browsing the web might prefer an empty sidebar. It's still an improvement over the alternative where you just have more spam and non-applicable advertising everywhere. Even if you took away all online advertising, you would be left with no way to fund all of the free services that so many seem to enjoy and depend on. Free email, file hosting, online office applications, videoconferencing, news, social platforms, and games don't pay for themselves.

Still, it's worth asking why Google was given the opportunity to settle such serious charges against it by writing a check, while Megaupload not only faced criminal charges, but had its servers seized and its executives arrested before they even had their day in court. (Google gave back $500 million, while Megaupload was said to have earned only $175 million total.)

Ars : This analysis is simply not correct

Google and MegaUpload's business model is not same under any circumstances. MegaUpload ( and similar cyberlockers like FileSonic, FileServe, FileJungle, Wupload,Oron etc etc ) sustain their business piggybacking on other's copyrighted works like making high speed uninterrupted downloads available for the latest music and high definition movies without paying a cent to the content owners. Now keep aside all these copyrighted files uploaded without the content owners consent and you will see a sea change in the number of subscribers who register on their sites to download these copyrighted files as the plans simply won't look interesting anymore to them.Yes..there are some personal files which are also uploaded... but none of these sites will be making millions like they are now if they only allow personal works/files to be uploaded.

Compare that with Google - they have products accross categories from free email, picassa, blogs, readers, docs and their blockbuster service : Google Search. Each of these are legitimate services, google invests billions to develop and update them.Most of its services are free for home users.Google has tied up with major content owners in the industry - RIAA Labels as well as Hollywood for both Google Music and its digital services and for YouTube. The content owners gets the audience and earns a few millions through its services. Besides YouTube has one of the most stringent take down policies in compliance wiith international standards and content owners blessings. Its another thing that RIAA still whines no matter what is given to them; but that's another argument altogether.Comparing them to MegaUpload is just exaggerating the whole "we are like Google..we are like YouTube" argument that almost all pirate website brings up in their defence. Since these providers have no intention to acknowledge and share any profit with the copyright owners; MegaUpload investigation even showed that the company itself was aware of all the infringing materials it was hosting and employees shared links amongst themselves( this is highlighted in one of the many Ars articles earlier ).

The difference between Google and MegaUpload is that Google had a half billion to pay off the feds while Mega did not.That's it, it's just that simple. Just like how the poor man will go to jail while a rich man can often just pay a big fine. Justice depends on the contents of your bank account at all levels.

The two cases are totally different. The vast majority of Google's business comes from legitimate advertising but a small percentage was illegal. The vast majority of MegaUpload's business was illegitimate piracy, but a small percentage was legal. Those are very different situations.

Frankly, I'm pretty disgusted to hear Ars defending MegaUpload. It makes it hard to believe that your objections to SOPA end with freedom of speech and dns security concerns.

Don't be a dumbass. The issue with Megaupload is that the feds yanked them - SWAT raids, helicopters, etc, seized everything, and shut them down. With no due process. At the behest of the US government. Meanwhile, Google, possibly all the way up the chain, is in bed with someone who is making no secret that what he's doing is blatantly illegal, not to mention dangerous and incredibly irresponsible. What does Google get? Served by a guy in a suit, to come have a nice talk with the DOJ. Little money here, little money there, and the whole thing goes away. No kicked-in doors, no helicopters. So Google takes up its couch cushions, scrapes the $500 mil out of the cracks between the frame and the seat, and it's back to business as usual. Meanwhile, MU and all involved are at best out of a job, and more likely sitting in jail. Why not have MU kick back a piece of their illegal profits to the governments involved, and leave them running? Its a new revenue stream for governments in painful times!

And, what, you're on the side of the RIAA/MPAA? Two industries that are having banner times, while they're crying about all the horrible pirates gonna make their children starve? Anything I might pirate isn't lost revenue to them - I wasn't going to buy it anyway. I haven't bought a new CD or DVD in longer than I can remember. Before that, it was buy used for years. Why isn't Congress ignorantly demanding that every used CD/DVD shop be shut down before it ends western civilization? At least there, there's a little more correlation in lost revenue - artist & label get nothing, just the shop. If I pirate, no one has lost anything at all.

Megaupload should have had its day in court before its servers got shut down.

Um, no they shouldn't have. Do you really want businesses that are acting illegally to continue to prosper while their cases drag through the court system? The government shuts down everything from racketeering rings to peanut butter processing plants with health code violations without allowing them their day in court first.

Don't be a dumbass. The issue with Megaupload is that the feds yanked them - SWAT raids, helicopters, etc, seized everything, and shut them down. With no due process.

Dear me, I seem to have forgotten the chapter on Arresting Potentially Violent Gang Members but have loaned out Miss Manners Guide to RICO Prosecutions

Is it acceptable to serve arrest notices on ivory paper with brown engraving, or must silver be used? Is it acceptable to state, “sorry, no children” on the RSVP? Six weeks notice enough?

Apparently, the legal notion of “due process” has become quite complicated since I last paid attention to Fifth Amendment issues, way back around Miranda. What rights did the Feds illegally withhold from MegaUpload?

Ah yes, the same scumbag organisation that is happy to accept money from the con job that Bidfun - Google *COULD* investigate each client before selling ad space but hey, that might end up losing them all those profitable con job organisations that pay Google per click.

Come on Google is greedy, they sell ads. What else do you expect? I do not use much of anything Google. I can't respect such a company that simply creates software and products to better track people and sell more ads. They are not evil, they are just selling their soles for ads.

I'm terribly sorry but I just can't lend much credence to comments in which words are misspelled and really change the entire meaning of the sentence. Selling the bottom of their shoes for ads? Please pay attention more if you expect to be taken even semi-seriously.

Ah ... part news story, part editorial. Welcome to Internet News, where the separation between news and editorializing is well, not much. Wasn't this behavior everyone's favorite complaint about newspapers?

No, I don't necessarily disagree with the editorial message that appears at the end. But could you wait a day and wrap it up, along with another example or two, in a separate piece?

You know ars, there's value in letting the news --- boring and dry as it may often be --- stand on its own and letting the reader decide its significance. Doing so helps breed intelligent readers, not hand-held ones who can't think for themselves.

My apologies to everyone who has low tolerance for reading unexpected rants. (You'll be OK.)

Normally I'd have no truc with this interpretation, but in this case I think you've hit the nail the head. This article crosses a line between news and editorial which is not justified by the content. Particularly the last paragraph where the two cases are somehow the same except different. This story deserved straight reporting.

Still, it's worth asking why … Megaupload … had its servers seized and its executives arrested before they even had their day in court.

I don't suppose the author of this article is an expert in New Zealand practices, either.

But isn't that how it works all the time? You get arrested, you get arraigned in court. Can't arraign you if you're not arrested. Also, a judge evaluates how much of a flight risk you present, and sets bail accordingly. In the case of a criminal enterprise, the tools of their activity are often seized, to prevent further illegal activity.

Looks pretty much by-the-book legal process. What am I missing?

This is NOT passing on the criminality of MegaUpload, just saying that it looks like exactly the way other massive white-collar and/or high-stakes, possibly violent crimes are handled, e.g., Bahamas-based Ponzi schemes.

TFA seems to be distracted from the nominal issue about … oh, now I see the problem. This article is about the world's biggest online ad agency being unable to follow a long-standing law about advertising drugs to US residents (one that, in fact, it had previously had a brush-up with the DoJ), but actually is about New Zealand's police practices.

Timothy B. Lee / Timothy covers tech policy for Ars, with a particular focus on patent and copyright law, privacy, free speech, and open government. His writing has appeared in Slate, Reason, Wired, and the New York Times.